Initial Growth Surge
In 2025, India witnessed significant economic expansion, primarily fueled by a surge in trade activities. This growth was further supported by adjustments
in global supply chains ahead of policy changes. However, these positive influences are anticipated to lessen in 2026. This slowdown is due to a projected softening in both trade and domestic demand. Conversely, low-income nations are predicted to experience higher growth, averaging 5.6% during 2026–27. This acceleration will be driven by strengthened domestic demand, recovering exports, and moderating inflation. The global economy demonstrates resilience, despite continued trade tensions and policy uncertainties, yet it gradually loses the capacity to generate robust growth over time.
World Bank Predictions
The World Bank's recent assessment estimates India's growth rate for FY26 at 7.2%, which is slightly lower than the government's prediction of 7.4%. For the following fiscal year, the growth rate is anticipated to be 6.5%. The report indicates that the global economy is evolving, becoming more resistant to economic uncertainties. The global growth is expected to remain relatively stable in the coming years. A slight easing is forecasted, reaching 2.6% in 2026 before increasing to 2.7% in 2027. This represents an upward adjustment from the June projections. The growth forecast remains unchanged despite the imposition of higher tariffs on certain exports to the United States. This stability is attributed to stronger-than-expected momentum in domestic demand, which offsets the negative impacts of higher tariffs.
Factors and Forecasts
The report anticipates that the growth will rise to 6.6% in FY2027/28. This increase will be supported by a robust services sector, along with a resurgence in exports and increased investment. Economic dynamism and resilience cannot be sustained without a stable public finance and credit market. The report emphasizes the importance of liberalizing private investment and trade to prevent stagnation and job losses. Additionally, there is a need to curb public consumption and invest in advanced technologies and education in both emerging and advanced economies. Growth in developing economies is projected to slow to 4% in 2026, dropping from the previous 4.2%, and then rising to 4.1% in 2027. This anticipated increase in growth is due to easing trade tensions, stable commodity prices, improved financial conditions, and increased investment flows.
India's Growth Outlook
The World Bank projects that India's growth will decelerate to 6.5% in FY2026/27. This forecast assumes that the United States' 50% import tariffs will remain in effect. Over the upcoming years, the global economy is expected to grow slower compared to the troubled 1990s, coinciding with record levels of public and private debt. However, easier global financial conditions and fiscal expansion in several large economies could help to mitigate the slowdown. The income gap between developing and advanced economies is unlikely to narrow at the current pace. The growth of per capita income in developing economies is projected to be 3% in 2026, approximately one percentage point below its average from 2000-2019.
